Record Store Day: A Brief Financial History

Five years ago, things weren’t looking so good for vinyl records. Annual sales of LPs in the U.S. had dipped below 1 million for the first time in a decade, and record giant Tower had just gone out of business. Independent stores were likely next.

Michael Kurtz, a longtime music producer and technician, was sitting around with a bunch of record store owners trying to brainstorm ideas to reverse that trend when Chris Brown of Bull Moose Music suggested dedicating a day to record stores. It could be music’s version of Free Comic Book Day, a successful effort that had been launched a few years earlier.

Kurtz and Brown began reaching out to record labels to see if any artists would be willing to participate--and quickly landed one of the biggest stars on the planet: Paul McCartney.

“That gave us a lot of strength,” says Kurtz. “Then we went to Metallica’s manager, and they said they’d love to [participate]. Those were our first two major things.”

Just half a decade later, Record Store Day has developed into a major annual event for the music business. In its first year, 10 artists released special edition vinyl albums that hit stores at a total wholesale cost of $30,000. This year, 300 new releases will add up to $6 million. In the first year, 250 stores participated; now, 1700 stores around the world are involved.

Record Store Day has also helped move the needle in the right direction for vinyl. Sales soared to 3.9 million last year, up from 2.8 million in 2010—and about four times the annual total before the advent of Record Store Day. For the fourth year in a row, more LPs were sold than in any other year in the SoundScan era; of the 228 million physical albums sold in 2011, nearly 2% were vinyl. Two-thirds of those albums were purchased at independent music stores, which received a bump of 182,000 units thanks to last year's Record Store Day, according to Billboard.

It’s not just nostalgia—the largest demographic buying records now is the under-30 crowd. Though the Beatles’ Abbey Road moved 41,000 units last year to claim the top slot, nine of last year’s ten most popular vinyl albums were released by contemporary artists. The Fleet Foxes’ Helplessness Blues sold 29,700 copies, ranking second. Bon Iver’s self-titled LP moved 27,200, followed by Mumford & Sons’ Sigh No More at 26,800.

“The reason [young people] are adopting it is because it enables them to have a sort of psychic connection to the artist,” says Kurtz. “If you want to hear what the recording is supposed to sound like, you pretty much have to have it on vinyl."

This year, Record Store Day highlights will include limited edition offerings from The Flaming Lips, Bruce Springsteen, Arcade Fire and others. Made in small batches ranging from a few hundred to a few thousand, many are handcrafted and individually numbered by band members.

To be sure, some LPs will be on the pricey side, especially for people used to buying cheap albums on iTunes. Regular vinyl records typically have a wholesale price anywhere from $10-$20; special editions will retail for much more, leading some music fans to wonder if they’re being gouged. But Kurtz says Record Store Day is still to small to be a big moneymaker for record companies.

“Even if the labels went crazy and added $10 to the price [of each record], it wouldn’t matter,” he explains. “It’s so little money.”

It might not stay that way for long—Record Store Day is just starting to catch on in Europe, Japan and elsewhere.

“The growth is going to be there for some time,” says Kurtz. “It’s just at the beginning of its life.”